Skip to main content

Mutual Fund route of taking exposure to global equities

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

Underlying securities in international funds or investments in mother funds are made in foreign currency, which makes them vulnerable to currency risk

THERE was a time when we Indians longed for anything and everything phoren. Right from perfumes and watches all the way to televisions and cameras, we drooled at those big global brands. Then, with the unleashing of economic reforms, the Indian economy took a dramatic turn from 1991 and transformed itself beyond recognition. It then was the turn of the global brands to fall head over heels on India to grab a pie of its growing prosperity.


However, today, we are in a state of worry about the threat of withdrawal by foreign investors. Times do change and how drastically! Unfortunately, the law of gravity seems to have caught up with the Indian growth story. The last few years have turned out to be a disappointment for the country's economy with global and domestic reasons conspiring to put a spoke in the smooth running wheel of India's rapid progress.


India's growth prospects, which seemed a given at about 8 per cent to 9 per cent, even quite recently, looks troubled today.


The need to diversify beyond Indian equities: It is quite obvious that no country will continue to perform well forever. Each one is going to have its own period of glory and worry (refer to the exhibit below). You can find India frequently alternating between the best and the worst performers. In general, while emerging markets are considered high potential, it is also equally true that they are more volatile.


Many emerging markets fell more than the developed markets, the originators of the 2008 crisis.

Similarly, while the BSE Sensex handsomely outperformed both the MSCI World Index and the MSCI EM Index in the 2002-2007 period, it has been quite the other way round in the 20082013 (YTD) period.

It is in this light that we need to continually review and re-evaluate our investment beliefs and practices in a dynamic world environment. We must also appreciate the risk of betting too much money on only one story. There are so many excellent businesses globally that are making lives easier and better for people. By keeping your money only within India, you are effectively ignoring 98 per cent of the global equity market. While some countries thrive on minerals and resources, there are others who have an edge in manufacturing or services.


Benefits of global investing:

Access to global industry leaders: You can participate in the wealth creation of the best and the biggest businesses globally, many of which do not have a presence in India. The largest retailer in the world, largest social networking company, largest software business and many more of your favorites can find a place in your portfolio.

Portfolio diversification: By adding global investments that have low correlation with Indian equities, the overall risk of your portfolio is reduced.

Currency diversification:

By spreading your investment across currencies, you are minimising a very potent risk. The recent sharp depreciation of the Indian rupee is a good wake up call.

Geo-political diversification: By spreading your investment across the globe, your investment will be less impacted by the political and geo-political risks of investing.

Here's an example of how a 20 per cent exposure to international equities enhanced performance even while reducing risks. The risk/return too improves, especially in bear markets.


Global investing now made easy:

Yes, scouting the global equity markets and picking from the thousands of stocks is indeed quite a task. But with mutual funds offering access to global equities through the feeder fund route, you can effortlessly invest abroad without any additional documentation or KYC procedures. On the whole, going global with your equity investing is a prudent and necessary step.


Risk factors:

Though investing globally enables diversification and also provides better risk-adjusted returns, investments are subject to several risks: Currency risk: Underlying securities in international funds or investments in mother funds are made in foreign currency, which makes them vulnerable to currency risk. Lately, the dollar has appreciated sharply against most emerging market currencies, with the domestic rupee reaching historic lows (Rs 66.25 per USD on August 27). A fund investing in, say, the US market, would benefit as follows. If an investor invests Rs 50,000 in an international fund when the rupee conversion rate is Rs 55 per US dollar (1,000 units @ 1 unit per US dollar), and exits when the conversion rate is Rs 65per US dollar, the investor's gain on account of the conversion factor would be Rs 10,000 [1,000 units * (65-55)], assuming there are no mark-to-market gains/losses. However, on the negative side, the appreciation of the rupee can result in capital loss.

Country/ geo-political risks:

International funds will always be subject to countryspecific, economic and geo-political risks pertaining to the country / region they invest in. For example, the economic dishevel caused by a tsunami and nuclear crisis in Japan in February 2011 impacted its market severely compared to other global markets.

Tax treatment:

International funds that invest at least 65 per cent in Indian stocks and the remaining in international markets are categorised as equity funds. Shortterm capital gains for such funds are taxed at 15 per cent for these funds, while longterm capital gains are tax free. Dividend received by unit holders under these funds is exempted from tax. All other types of funds (including all fund of funds) in this category are taxed like debt funds, where long-term gains would be taxed at a flat rate of 10 per cent without indexation or 20 per cent with indexation. Short-term gains will be added to the investor's income and will be taxed as per the applicable slab rates. These funds would also attract the dividend distribution tax of 28.34 per cent. Hence, investors must understand the structure of the international fund to know the tax implications.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Understanding Your Cibil Credit Information Report

   WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions.    While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application.    Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...
Read more

How much to invest in gold ?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) Let your motivation dictate the share of the yellow metal in your portfolio Enough has been said and written about gold as an investment option. The latest argument is that the craze for gold among Indian households is endangering our country's balance of payments. The policymakers are busy trying to find ways of discouraging investment in gold, but if households keep the common good in mind, they would be paying the market price for gas cylinders as they do for, say, their mobile phone bills. After all, private decisions are driven by private motives. So, how should a household look at gold from its own perspective? Gold is primarily acquired for its merit as a store of value. Even if the worst crisis hits a family, the gold that it holds could be put to use anywhere in th...
Read more

Time-tested methods to pick a good mutual fund

Proper understanding of a fund is important as it enables investors to keep a tab on its actual performance THERE are various types of mutual funds and one way of segregating them is on the basis of active or passive management. Th is makes the understanding of the nature of the fund easy for a lot of investors, as it shows the basis on which investment decisions will be made. Some funds also have a mixture of both active and passive management. Su ch funds need to be considered carefully if they are to be selected as an investment avenue. Here is a look at the manner in which such funds operate and its impact on decision-making. Mixture : The selection of the portfolio of an equity oriented mutual fund can be done in an active manner. The fund manager can take the decision about which stocks should be bought and sold by the fund. On the other hand, there can be a passive fund where the decision making is not in the hands of the fund manager as a specific index is followed for...
Read more

Save Tax With Mutual Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300       Mutual funds are ideal as long term investment avenues for retail investors. To encourage investments in this avenue, the Government of India offers investors a spate of tax benefits thus ensuring maximum benefit from mutual funds held beyond a year. Sample some of the key benefits and refer to the table for a detailed list of tax rates for different types of schemes ·        Avail deductions under Sec 80C of the Income Tax Act by investing up to a maximum of Rs. 1 lakh in designated Equity Linked Savings Schemes (ELSS). Such investments have a compulsory lock in period of 3 years. ·        First time retail investors in equity with a gross total income of up to Rs. 12 lakh can invest up to Rs. 50,000 in specific MF schemes un...
Read more

Diversification is key to gain more

Even those who prefer debt for its safety are looking at more options    It is not often that you find more than a couple of asset classes producing good returns at the same time. Invariably, assets such as gold and equity don't perform in tandem, and hence it was easier to allocate to them in line with the risk profile of the investors. In the last couple of quarters, however, more than one asset has turned attractive - gold, debt and equity. In line with the trend, you even have monthly income plans with a combination of more than two assets.    In the past, those who stuck to debt were a different class of investors who didn't wish to take risk with their money. The changing lifecycles and the growing integration of investment markets across the globe have pushed even individual investors to embrace the concept of asset allocation. Hence, you have individuals who were using debt to park profits being prepared to take advantage of other assets.    For instance, when the...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now